This National Credit Education Month, Aim to Better Understand the Credit Fundamentals

Observed each March in the United States, National Credit Education Month was created in an effort to emphasize the importance of developing and maintaining good personal credit. The observance is also meant to shine a spotlight on the substantial impacts that credit can have on consumers’ financial well-being — and even their everyday lives.

So this National Credit Education Month, vow to increase your knowledge about and understanding of credit and its components. Read on for more details on some of the fundamentals regarding credit, its importance, and how to build, maintain and improve your personal credit score.

The importance of having good credit

Nearly every consumer needs to borrow money at one time or another. And whether this is done by applying for a relatively low-limit credit card or seeking out a much larger loan such as a car-purchase loan or a mortgage, having good credit lets lenders know that the applicant can be trusted to pay back the borrowed money — making it easier for the consumer to get approved for the loan. 

Further, because consumers with good credit present a lower risk of loan default for lenders, these consumers are typically able to borrow money at (often significantly) lower interest rates, saving what can be substantial sums of money over the long haul. And the benefits of good credit don’t end there. Good credit can also make it easier for consumers to be approved to rent an apartment, get their utilities connected without paying a security deposit, get better insurance rates and more.

Understanding your credit score

A consumer’s credit score, a number that typically ranges from 300 on the low end to 850 on the high end, acts as a representation of his or her credit-worthiness. The higher a consumer’s credit score, the lower his or her perceived risk of defaulting on a loan — and the more trust lenders tend to place in the consumer to repay any money borrowed. For these reasons, consumers with high credit scores are more likely to get approved for loans, and they are usually given access to lower interest rates when they do borrow.

As a general rule, a credit score that lands at 670 or higher — which is the case for about 65% of U.S. consumers — is considered a good credit score. On the other end of the spectrum, credit scores that land under 580 are considered poor. The average U.S. credit score from FICO, one of the nation’s leading credit-scoring services, came in at around 715 in 2022 — and has been on the upswing in recent years.

To take a deeper dive into credit scores and to learn how to get yours, check out our blog article titled “A Primer on Credit Scores, What They Mean and How They Are Calculated.”

How to build your credit score

Building a good credit score takes time, financial discipline and a few deliberate steps geared toward demonstrating that you can be trusted to repay loans. Some of the leading tactics that can be employed to build good credit include:

  • Creating a positive credit history by taking out loans and efficiently repaying them
  • Making timely payments on all loans and other bills
  • Signing up for utility accounts in your name and maintaining a good record of timely payments when bills arrive
  • Maintaining a good credit-utilization ratio, meaning that the debts you owe are kept relatively low compared with the amounts of money you’ve been approved to borrow (To do this, borrowers should make sure that they pay off their credit card debts each month. Plus, consumers should consider opting to keep lines of credit such as credit cards open even after their debts have been fully repaid, as this helps to keep their available credit at higher levels.)

For those just getting started building their credit, a couple good options for establishing good credit include getting low-limit credit cards and participating in the financing programs/securing the store credit lines offered by many retailers. A secured credit card — in which a consumer pays a cash deposit to secure his or her credit line — is another good option here.

How to improve your credit score

Many of the same tactics used to build a good credit score can also be used to maintain and/or improve one’s credit score. These include paying bills on time and maintaining a low credit-utilization ratio (also known as debt-to-credit ratio). 

Additional effective tactics that can be used here include:

  • Checking your credit reports regularly (A consumer’s credit score is largely based on the information found in his or her credit reports. And the law requires each of the three major U.S credit-reporting agencies — Equifax, Experian and TransUnion — to provide U.S. consumers with a free copy of their credit report once a year upon request. To request your credit report, visit and fill out the online form. And if you find any errors, dispute them right away.)
  • Limiting the number of new credit lines you open, as applying for these can often result in “hard inquiries” (checks of your credit history) that can negatively impact your credit score
  • Working with creditors to negotiate alternative payment terms when you know that you may be late with a payment (which can often prevent your late or non-payment from being reported, thereby avoiding a negative credit-score impact)

Looking for more inspiration to improve your credit score? Check out our blog article titled “7 Benefits to Having a Good Credit Score.”

At The Southern Bank, we pride ourselves on offering friendly, personalized service to all of our customers — and that includes providing guidance when you have questions about any of our banking services. To learn more about our Personal Banking services ranging from Personal Checking and Personal Loans to Savings & Money Market, Certificates of Deposit (CDs), Mortgages, and more, check out the Personal Banking page on our website or visit one of our local branches for friendly, in-person service with a smile.

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